KUALA LUMPUR: Fertiliser markets could be on the cusp of a more sustained upcycle rather than a short-lived price spike, as geopolitical tensions reshape global supply chains and tighten availability of key inputs.
Cropmate Bhd managing director Lee Chin Yok said current disruptions linked to the Middle East conflict are exposing deeper structural pressures across the industry, particularly in sourcing and logistics.
“Overall, we see this as the early phase of a potential upcycle, rather than a purely short-term fluctuation,” he told SunBiz, pointing to a convergence of supply constraints and resilient demand fundamentals.
Fertiliser prices have already reacted sharply. Urea prices have climbed about 35% since the start of the conflict, while sulphur prices have surged roughly 40% since February, reflecting tightening global supply.
However, Lee stressed that the issue extends beyond pricing.
“More importantly, the situation is not just about pricing, but availability,” he said, noting that disruptions to key shipping routes such as the Strait of Hormuz have slowed global supply flows, with parts of the market approaching what he described as a “near standstill”.
For Cropmate, the immediate impact has been relatively constructive. A stronger pricing environment is supporting higher selling prices, particularly for inventory secured earlier, which could enhance margins in the near term.
At the same time, customers are placing greater emphasis on supply reliability, shifting demand towards suppliers with established procurement networks and consistent delivery capabilities.
“In the current environment, pricing power and market share are increasingly shifting towards suppliers with stable supply capabilities,” Lee said.
Despite the volatility, Cropmate has not experienced material supply disruptions so far, supported by its procurement planning and inventory management strategies.
The company operates on a cost-plus pricing model, which allows it to pass rising raw material costs through to customers. As a result, higher commodity prices tend to translate into increased selling prices rather than significant margin expansion.
“Margins tend to remain relatively stable, rather than being significantly compressed or expanded,” Lee explained, adding that the focus remains on pricing discipline and continuity of supply.
He noted that the group’s procurement strategy may offer short-term benefits where inputs were secured at earlier price points, although the broader emphasis is on maintaining stability rather than capturing windfall gains.
Compared with previous fertiliser cycles, including the Covid-19 pandemic, and the current Russia-Ukraine conflict, Cropmate believes it is now better positioned to manage volatility.
Lee said the company has strengthened its procurement and inventory planning, including diversifying sourcing and maintaining appropriate stock levels to mitigate supply disruptions and price spikes.
The current cycle, however, presents a different challenge. “Volatility is being driven not only by pricing but also by supply availability,” he said, highlighting that logistics disruptions are playing a more pronounced role this time around.
On the demand side, plantation players, particularly in oil palm and durian, are beginning to adjust purchasing behaviour in response to rising prices and uncertainty.
While fertiliser remains an essential input and overall demand is holding up, some buyers are becoming more proactive in securing supply earlier.
“The shift is towards earlier and more disciplined purchasing, rather than a decline in demand,” Lee said, adding that most players are focusing on optimising application rather than cutting usage.
Cropmate’s exposure to geopolitically sensitive regions is mitigated through diversified sourcing, forward procurement and continuous market monitoring, allowing it to respond proactively to disruptions.
Lee also pointed out that the group’s focus on blended and specialty fertilisers provides an added layer of resilience.
Blended fertilisers offer formulation flexibility, enabling the company to adjust input mixes based on prevailing raw material conditions, while specialty fertilisers tend to be more value-added and less price-sensitive.
“This combination enables us to maintain pricing discipline and product relevance, even in a rising cost environment,” he said.
Unlike larger industry players that are heavily tied to long-term plantation tenders with fixed pricing commitments, Cropmate operates a more flexible, demand-driven model.
The company primarily serves smaller plantations, traders and retailers, where pricing cycles are shorter and more responsive to current market conditions. This allows it to adjust prices more dynamically and manage cost fluctuations more effectively during periods of volatility.
“In contrast, larger players with long-term volume commitments may face greater exposure when input costs rise sharply,” Lee said.
As global supply chains remain under strain, the fertiliser sector’s trajectory will ultimately depend on how geopolitical developments unfold.
